Welcome to Ninja Crypto Trader.
Today I’ll be taking you through the Best MACD Crypto Trading Strategy for Bitcoin.
The Moving Average Convergence Divergence or MACD indicator strategy is beginner friendly and can produce great profits if done correctly. Also, I’ll be giving you a few tips on how you can combine it with other indicators or other forms of technical analysis in order to get better entry points on your trades.
Let’s get started.
Now as you can see, I have placed the MACD here below the chart.
If you want to get it, all you have to do is go to Indicators and just type in MACD, and you pick the first one that shows up: MACD. So this is the indicator down here.
And as you can see, the two lines, a blue one and a red one, as well as a histogram, this red histogram.
So what do each of these mean?
Now, the blue line is the difference between the 26-period EMA or Exponential Moving Average and the 12-period EMA. That is what creates this blue line here. Now, the red line is the 9-period EMA, also known as the signal line.
So these two are what we mainly use in order to get our entry points, and the red histogram basically shows you how far above or below the MACD is from the signal line.
When it’s above, as you can see, the histogram is above zero, and then when it’s below, we can see the histogram is below zero. But the histogram isn’t really used that much for trading purposes; we will mainly focus on the MACD line and the signal line.
The MACD is a trend indicator and is not used to show overbought or oversold scenarios like maybe an RSI. So we will use the MACD line and the signal line in order to get entry points for either long or short positions, as this indicator is used to show trends before they occur.
So let’s look at a few examples of how we can use this to spot a trend before it occurs.
Now, when the MACD line crosses above the signal line, we expect an uptrend, and when it crosses below the signal line, we expect a downtrend.
It really is that simple to use; all you have to do is look for these crosses.
So you can see here, we have a cross of the MACD line above the signal line, and as you can see, an uptrend followed.
Here as well, we do have a cross of the MACD line and the signal line, and a downtrend followed.
Now, it’s not to say that you will always be able to get an entry point whenever there is a cross.
For example, here we do have a cross where the MACD line crosses below the signal line, but you can see the price went up and ranged for some time before eventually coming back down.
So what we’re also going to be looking at here is how you can combine the MACD indicator with different indicators or other forms of technical analysis in order to improve your entry points for trades.
The first one I want to show you is if we add a Relative Strength Index (RSI) indicator.
As I said earlier, the MACD is mainly used as a trend indicator, and now we’ve added an RSI, which is used to show overbought or oversold situations.
If we combine these two, when we look at this point here, we do see a cross showing that there is going to be an uptrend, and we also see that the RSI is in an oversold area, this area below 30.
For those of you who watched previous videos, I have spoken about the RSI before, and once again, this is the oversold area, and this is the overbought area.
When we’re looking to get into an uptrend, what we want to see is the RSI here in the oversold zone. And as you can see, this cross follows with the RSI. As the RSI went into the oversold zone and started coming back up, this cross happened, and the price went up.
Now, there are other examples that we can go through here.
For example, we do have this point here.
So the RSI came from an overbought zone, and as it was coming back in, we do get a MACD cross, and the price goes downwards.
Now, you can test this further and also look at different indicators that you can use to combine with the MACD indicator.
What you should have in mind is that the MACD indicator is a trend indicator, so you don’t want to be putting other trend indicators with the MACD as they’ll basically be showing you the same thing.
What you want to do is find maybe volume indicators or oscillators which will be able to improve your entry point as it will give you a new aspect to look at other than the trend indicator that we’re getting from the MACD.
So another way that we can use the MACD is through candlestick patterns.
You can also combine it with candlestick patterns, which is another form of technical analysis that can enable you to get better entry points.
So if we come to this point here, we have what is known as a Morning Doji Star, which is a bullish signal, and as you can see, it is followed by a cross on the MACD, which signals an uptrend, and as you can see, the price continued trending up.
Also, we can see we have a double top here, so we do see a cross on the MACD at this point where the double top just occurred, and once a double top comes back, once you now confirm a double top and we start moving, and the MACD now is trending below the signal line, you can expect a downtrend, and you can now open your trade with better confirmation.
So these are just two examples of how you can use other forms of technical analysis or indicators in order to better your entry points with the MACD indicator.
And that is it for this Best MACD Crypto Trading Strategy for Bitcoin with MACD indicator.
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And by this, I am signing out.
